Center for ESG Researchhttp://esgresearch.dk
An independent think tank on ESGThu, 24 May 2018 08:49:29 +0000en-GBhourly1https://wordpress.org/?v=4.9.6TCFD Knowledge Hub appreciates the Integrated Ratio Guidelinehttp://esgresearch.dk/tcfd-knowledge-hub-appreciates-the-integrated-ratio-guideline/
http://esgresearch.dk/tcfd-knowledge-hub-appreciates-the-integrated-ratio-guideline/#respondWed, 02 May 2018 11:13:43 +0000http://esgresearch.dk/?p=658The TCFD Knowledge Hub has been launched – and can be found here.

The Hub works as a database of useful and inspiring guidelines, examples, and legislations from around the world, whereby companies can find the resources they need to understand and implement the TCFD recommendations.

The Hub is divided in 4 sections: Governance, Strategy, Risk Management, and Metrics & Targets. On the latter, TCFD has chosen that Center for ESG Research’ Integrated Ratio Guideline is part of the “Resources to get you started” – we are very honored.

We study voting at shareholder meetings by two emblematic global investors: BlackRock, a major asset manager, and the Norway Fund, a responsible sovereign wealth fund. Our data cover 2014 and include the two institutions’ votes on 35,382 resolutions at 2,796 corporations across the world.

Both of these so-called universal owners oppose management significantly more often on externality than on financial issues. The Norway Fund is more active on shareholder resolutions concerning externalities related to environmental and social issues rather than governance issues.

The difference between the two investors’ voting behavior is larger when we focus on resolutions related to greenhouse gas emissions, a clearly identified externality.

We identify 1,496 instances of large CEO paycuts during the period 1994-2013. We then create a propensity-score-matched control group of firms that did not cut their CEOs’ pay and employ a difference-in-differences approach to examine the consequences of paycuts.

Our results show that, following a paycut, CEOs are likely to engage in earnings management in an attempt to accelerate improvement in the reported performance and to achieve a speedier restoration of their pay to pre-cut levels.

Further, we find that improvement in long-term performance after a paycut occurs only for those firms with lower levels of earnings management after the paycut.

Finally, we show that paycuts are more likely to lead to unintended value-destroying consequences in the absence of high institutional ownership or when the CEO is sufficiently entrenched, thereby impairing the effectiveness of internal monitoring by boards.

By: Gerald J. Lobo (University of Houston – C.T. Bauer College of Business), Hariom Manchiraju (Indian School of Business (ISB), Hyderabad), and Swaminathan Sridharan (Northwestern University – Kellogg School of Management)

Read the forthcoming Journal of Accounting and Public Policy article here

Overall, we do not find evidence that shareholders vote against auditor ratifications when their auditors receive unfavorable inspection reports. However, we find some evidence that shareholders cast their votes against the ratifications of auditors receiving unfavorable inspection reports when the corporate governance is weak, as proxied by CEO duality and a low level of board diligence.

Our results suggest that shareholders seem not to incorporate inspection reports as a potential proxy for auditor quality in their vote decisions on auditor ratification.

By:Myungsoo Son (California State University, Fullerton – Department of Accounting), HakJoon Song (California State University, Dominguez Hills), and Youngkyun Park (University of Idaho – College of Business & Economics)

See the entire paper from Accounting and the Public Interest, Vol. 17, No. 1, 2017 here

]]>http://esgresearch.dk/pcaob-inspection-reports-and-shareholder-ratification-of-the-auditor/feed/0High Level Expert Group on Sustainable Finance (HLEG): Final Report 2018http://esgresearch.dk/high-level-expert-group-on-sustainable-finance-hleg-final-report-2018/
http://esgresearch.dk/high-level-expert-group-on-sustainable-finance-hleg-final-report-2018/#respondFri, 02 Mar 2018 12:29:40 +0000http://esgresearch.dk/?p=637The European Commission established the EU High-Level Group on Sustainable Finance (HLEG) to help develop an overarching and comprehensive EU roadmap on sustainable finance. It requested advice on how to ‘steer the flow of capital towards sustainable investments; identify steps that financial institutions and supervisors should take to protect the financial system from sustainability risks; and deploy these policies on a pan-European scale.

Given the complexity of the financial system and its policy and regulatory framework, there is no single lever to achieve these ambitions and ‘switch’ the financial system to sustainability. Improving the contribution of the financial system to sustainable and inclusive growth requires a comprehensive review, the identification of areas where changes are needed, and the development of specific recommendations in these areas. That is what the HLEG has sought to deliver.

Overall the HLEG recommendations are:

1.Establish and maintain a common sustainability taxonomy at the EU level

2.Clarify investor duties to better embrace long term horizon and sustainability preferences

5.Develop and implement official European sustainability standards and labels, starting with green bonds

6.Establish Sustainable Infrastructure Europe

7.Governance and Leadership

8.Include sustainability in the supervisory mandate of the ESAs and extend the horizon of risk monitoring

If you want to read the HLEG report and annexes, they can be found here

If you want to hear discussions on the HLEGs recommendations on Fiduciary duties – listen to RI’s webinar here

If you want to hear discussions on the HLEGs suggestions for Green Banking Incentives – listen to RI’s webinar here

If you want to hear discussions on the HLEGs definitions and taxonomy of how to define Green Finance – listen to RI’s webinar here

]]>http://esgresearch.dk/high-level-expert-group-on-sustainable-finance-hleg-final-report-2018/feed/0UNCTAD/ISAR publishes research paper by Center for ESG Research: Reporting on the Sustainable Development Goalshttp://esgresearch.dk/unctad-isar-publishes-reserach-paper-by-center-for-esg-research-reporting-on-the-sustainable-development-goals/
http://esgresearch.dk/unctad-isar-publishes-reserach-paper-by-center-for-esg-research-reporting-on-the-sustainable-development-goals/#respondFri, 02 Mar 2018 12:27:23 +0000http://esgresearch.dk/?p=609“The SDGs present an opportunity for business-led solutions and technologies to be developed and implemented to address the world’s biggest sustainable development challenges,” As noted in the SDG Compass. But if neither the corporate nor its capital providers can accurately and easily interpret information from Environmental, Social, and Governance (ESG) reporting, is ESG reporting really supporting the SDG agenda?

Current reporting guidelines, initiatives and best practice often provide disclosure suggestions, rather than guidance on how to interpret the report content. This is where the SDG agenda can offer a valuable new framework, a reference for the interpretation of the content of ESG reporting.

This research paper provides relevant inputs into UNCTAD’s work by exploring current reporting practices, from an empirical perspective by describing the reporting practices of the global top 100 listed companies, the use of ESG indicators by ESG rating agencies and considering overarching data principles needed in order to collect comparable and useful data.

]]>http://esgresearch.dk/unctad-isar-publishes-reserach-paper-by-center-for-esg-research-reporting-on-the-sustainable-development-goals/feed/0Insights from the Reporting Exchange: ESG reporting provisions trendshttp://esgresearch.dk/insights-from-the-reporting-exchange-esg-reporting-provisions-trends/
http://esgresearch.dk/insights-from-the-reporting-exchange-esg-reporting-provisions-trends/#respondFri, 02 Mar 2018 11:48:34 +0000http://esgresearch.dk/?p=634The research conducted as part of the Reporting Exchange project supports the existing argument that the variety and overlap of corporate reporting provisions make this field complicated and confusing 1,2. The research has allowed us to draw the conclusions outlined in this paper:

• There are currently over 1000 reporting requirements for sustainability information, representing a 10-fold increase since the Rio Earth Summit in 1992, which are accompanied by around 750 reporting and management resources;

• The reporting landscapes of Asia-Pacific, Europe and North America have seen exponential growth in environmental, social and governance reporting requirements, while in South America the growth has been more linear and sustained;

• In recent years, reporting requirements have increasingly become voluntary for companies to follow, while also encouraging disclosures in mainstream annual reports; and

• The recent growth in the publication of reporting requirements has not been accompanied by a similar trend in the number of reporting and management resources, to assist companies towards more sustainable practices.

What becomes even clearer is the need to work towards the alignment and harmonization of sustainability reporting, focusing on both the national and international level. The insights, trends and developments that have been revealed and outlined here showcase the potential impact of the Reporting Exchange for corporate reporting. We believe the platform can support this process, acting as an evidence base and catalyst to evolve corporate reporting towards better practices.

]]>http://esgresearch.dk/insights-from-the-reporting-exchange-esg-reporting-provisions-trends/feed/0The Role of Information Asymmetry in CSR Reporting: A Comparison of Publicly-Traded and Privately-Held Firmshttp://esgresearch.dk/the-role-of-information-asymmetry-in-csr-reporting-a-comparison-of-publicly-traded-and-privately-held-firms/
http://esgresearch.dk/the-role-of-information-asymmetry-in-csr-reporting-a-comparison-of-publicly-traded-and-privately-held-firms/#respondFri, 02 Mar 2018 11:43:58 +0000http://esgresearch.dk/?p=631There is no consensus in the literature regarding what motivates firms to voluntarily publish corporate social responsibility (CSR) reports or who are the intended audiences of such reports.

To help address this gap in the literature, I test whether the degree of information asymmetry between the firm and its owners is a significant factor contributing to the publication of CSR reports. The study is the first to analyze the reporting frequencies of both publicly-traded firms and privately-held firms whose ownership is subject to less information asymmetry.

Using a sample of 239 of the largest private companies in the U.S. matched with publicly-traded firms, the effect of ownership structure on CSR reporting frequency is tested using logistic regression. Factors suggested by stakeholder and legitimacy theories, including firm size, firm visibility, customer power, and employee power are also tested.

Results indicate that private firms are much less likely to publish a CSR report than similar public firms. Public firms are also found to follow the Global Reporting Initiative guidelines at a higher rate than private firms, in-keeping with a greater need to signal report quality to dispersed investors.

Private firms reporting to the SEC because they have over 300 shareholders, anticipate an IPO, or have publicly-traded debt are found to be similar to public firms in their reporting behavior. Since the information environment of these firms represents a middle-ground between public companies and typical private firms, their reporting behavior reinforces the argument that information asymmetry is a motivation for voluntary CSR disclosure.

By: Leila Hickman, University of New Mexico – Department of Accounting

]]>http://esgresearch.dk/the-role-of-information-asymmetry-in-csr-reporting-a-comparison-of-publicly-traded-and-privately-held-firms/feed/0Credibility of Sustainability Reports: The Contribution of Audit Committeeshttp://esgresearch.dk/credibility-of-sustainability-reports-the-contribution-of-audit-committees/
http://esgresearch.dk/credibility-of-sustainability-reports-the-contribution-of-audit-committees/#respondFri, 02 Mar 2018 11:42:03 +0000http://esgresearch.dk/?p=625Concerns about the credibility of sustainability reports can be mitigated through assurance. Although audit committee remit encompasses monitoring of sustainability issues, there are potential complementary and substitution between governance mechanisms.

This paper explores the relationship between audit committees and sustainability reporting assurance using resource dependency theory.

We find audit committee characteristics have an impact, additional to that of the board of directors and the existence of sustainability committees, on voluntary sustainability assurance. Our results also show that audit committee independence is associated with use of a Big 4 audit firm for sustainability assurance. A negative association between sustainability committees and assurance however indicates assurance could be a burden for small firms.

Overall, the findings suggest audit committees add credibility and help improve sustainability reporting through their independence, expertise, and oversight.

By: Habiba Al-Shaer, Newcastle University Business School and Mahbub Zaman, Hull University Business School

]]>http://esgresearch.dk/credibility-of-sustainability-reports-the-contribution-of-audit-committees/feed/0The Impact of Top Executive Gender on Asset Prices: Evidence from Stock Price Crash Riskhttp://esgresearch.dk/the-impact-of-top-executive-gender-on-asset-prices-evidence-from-stock-price-crash-risk/
http://esgresearch.dk/the-impact-of-top-executive-gender-on-asset-prices-evidence-from-stock-price-crash-risk/#respondMon, 29 Jan 2018 21:17:59 +0000http://esgresearch.dk/?p=606We examine the implication of executive gender on asset prices. Using a large sample of US public firms during 2006–2015, we find a negative association between female CFOs and future stock price crash risk. However, the impact of female CEOs on crash risk is not statistically significant.

The results support the notion that CFOs play a stronger role than CEOs in curbing bad news hoarding activities because CFOs’ primary duties are financial reporting and planning. Our findings are robust to several econometric specifications controlling for potential endogeneity and to alternative measures of crash risk.

At last, we show that the negative relation between female CFOs and future crash risk is more pronounced among firms with weaker governance, less market competition, lower analyst coverage, and higher leverage.